Europe’s largest corporations are predominantly present in “previous” industries. It’s a pattern we first noticed in our inaugural Fortune 500 Europe record final yr, the place the highest 10 is dominated by fossil gasoline giants, automotive and finance.
That doesn’t examine favorably with the U.S. record, the place dynamic tech and pharmaceutical companies grapple for the highest spot alongside retail teams, and even hybrids of tech and retail, particularly Amazon.
There are simply 15 tech corporations on this yr’s Fortune 500 Europe, in contrast with 49 within the U.S. American tech corporations account for 5x extra income on the record in contrast with these in Europe.
That explains a few of the giant income hole between the lists. The U.S. Fortune 500 corporations accrued $18.8 trillion in revenues final yr, in contrast with $14.5 trillion for Europe’s titans.
Whereas the early winners of the AI growth—NVIDIA, Microsoft, and Google—have been discovered on the western facet of the Atlantic Ocean, legacy companies are shortly realizing the alternatives of automation.
“There’s a lot potential…”
Mark Learn OBE, CEO of WPP
Peter Oppenheimer, Goldman Sachs’ chief international fairness strategist and head of macro analysis in Europe, instructed Fortune earlier this yr the largest winners of AI could possibly be the businesses that leverage the know-how fairly than these at its leading edge, akin to the canal growth of the 18th century.
Amid a widening hole between AI gamers within the U.S. and the remainder of the market, and CEOs’ ongoing tussles over regulation in Europe, companies on the continent leveraging AI to search out efficiencies characterize the most effective probability of Europe closing the hole with the States.
However the race is on. In his 69-page EU competitiveness report, former ECB president Mario Draghi identified that European productiveness diverged from the U.S. within the Nineteen Nineties due to a failure to “capitalize on the primary digital revolution led by the web.”
To keep away from falling behind within the newest AI-based revolution, vertically integrating tech in Europe’s industries shall be key, Draghi says, and so they have to be fast.
“The query for European corporations is how they will leverage AI extra aggressively, no matter its origin. There’s a lot potential for them to make the most of the billions of {dollars} being invested globally,” Mark Learn OBE, CEO of communications firm WPP, instructed Fortune.
Jason Alden/Bloomberg by way of Getty Photos
Europe’s AI adopters
The debut of the inaugural Fortune 500 Europe record in 2023 got here as companies had been beginning to come to phrases with the implications of the appearance of ChatGPT. Massive Language Fashions (LLMs) allowed each member of a family to make the most of the know-how, offering them with the primary actual understanding of its capabilities.
“The subject [of AI] in itself shouldn’t be new,” Florian Mueller, EMEA head of AI follow at consultancy Bain & Co, instructed Fortune.
“I feel what has modified, and ChatGPT in all probability marks the true second of change, is that the speed of adoption has dramatically elevated.”
Mueller provides that, in contrast with earlier technological revolutions, implementing AI in a corporation is comparatively inexpensive.
Early proof would counsel Europe’s largest hitters don’t wish to be left behind within the newest technological revolution.
Mueller says that historically, AI implementation was sometimes the remit of industries already dealing with plenty of information, for instance, corporations working in information communications, banking, and insurance coverage.
He added that the broad tech integration within the final two years has been present in Gen AI.
“Whether or not it’s utilizing it for software program growth, for buyer help, whether or not it’s supporting data staff of their processes, quite a lot of uptake within the advertising area. All of these you see actually throughout the board.”
Volkswagen, the chief of the Fortune 500 Europe in 2024, introduced in January that it had launched an AI firm, following the introduction of ChatGPT to its autos firstly of the yr.
A number of carmakers are utilizing LLMs as in-car assistants, whereas AI is creating the bedrock for a possible way forward for autonomous driving.
Shell, a predominately fossil fuel-based firm based practically 120 years in the past, has additionally embraced the usage of AI throughout its operations. The corporate makes use of reinforcement studying to assist optimize its drilling operations, has partnered with C3 AI to develop predictive upkeep capabilities, and used machine studying for stock and demand forecasting.
The pharmaceutical sector, which boasts Fortune 500 Europe hitters like Roche Group, Novartis, and Sanofi, is shortly leveraging AI in cutting-edge drug discovery.
The shift, Mueller says, has created a warfare for expertise as non-tech corporations battle to recruit information scientists and machine studying engineers to assist remodel their operations.
Jeenah Moon/Bloomberg by way of Getty Photos
Is it actual?
The proliferation of AI adoption was met with fanfare amongst buyers, who cheered corporations’ enthusiasm for tech that promised to spice up productiveness. This early within the recreation, although, there aren’t but many examples of this funding translating into vital returns on funding.
Europe’s banking sector is perhaps the earliest instance of an trade that may use AI to reinforce profitability.
Evident, an intelligence platform, has drawn up an index of world banks ranked by their AI preparedness ranges, breaking it down by expertise, innovation, management, and transparency. Inevitably, European corporations fall behind American ones who put the foundations in place for the AI transition early.
Alexandra Mousavizadeh, co-founder and CEO of Evident, says Evident picked the banking sector for example of uptake as a result of it represented “mammoth organizations that had been going from legacy to making an attempt to turn out to be AI first,” and was utilizing AI in roles throughout its group.
European banks, together with HSBC and Spanish group BBVA, had been among the many highest Fortune 500 climbers within the final yr. However for different corporations which were sluggish to introduce autonomous methods and rent the sharpest new AI expertise, the window of alternative is closing.
“When it actually comes all the way down to ROI within the subsequent 18 months, they’re simply going to drag forward. And when that begins, the sport is over,” Mousavizadeh instructed Fortune.
Startup DeepL gives translation companies for half of the U.S. Fortune 500. David Parry-Jones, DeepL’s chief income officer, says there’s quite a lot of noise round LLMs which have made rollout more durable throughout organizations.
“The promise is clearly dramatic on the premise of what these items might do, however the actuality of implementation inside a big enterprise shouldn’t be the identical,” Parry-Jones instructed Fortune.
Krisztian Bocsi/Bloomberg by way of Getty Photos
Regulatory hurdles
A number of CEOs, together with Spotify co-founder Daniel Ek, have warned of regulatory variations between Europe and the U.S. that might trigger Europe to overlook out on the newest technological revolution.
Chatting with the FT earlier this week, Nicolai Tangen, the CEO of the $2 trillion Norwegian oil fund, summarized: “In America, you might have plenty of AI and little regulation, and in Europe, you might have little AI and plenty of regulation.”
Creating, launching, or simply utilizing know-how is more durable in Europe than it’s wherever else on the earth.
Matt Brittin, EMEA president for Google
Matt Brittin, Google’s EMEA president says, in some ways, Europe is in a superb place on AI.
”It has a well-educated workforce and a single market, which might assist new innovation scale and profit everybody quickly. Nonetheless, as Mario Draghi’s report final month discovered, the EU is falling behind its international counterparts relating to innovation,” Brittin instructed Fortune.
Brittin agreed {that a} explicit problem within the EU was the extent to which regulation on AI was carried out within the area.
“Over the past 5 years, we’ve seen over 100 new legal guidelines that have an effect on the digital financial system and society. After all, there have to be clear guidelines of the highway, however these guidelines are sometimes conflicting, untested, and inconsistently carried out.
“Put merely, creating, launching, or simply utilizing know-how is more durable in Europe than it’s wherever else on the earth. To remain within the international race, the EU wants a brand new strategy: mitigating the dangers of latest know-how whereas enabling innovation.”
